Posted on January 21, 2021 By By guest blogger Mark Beal, an advisor with Baer Wealth Management. The author is not an attorney and is not affiliated with Taylor English Duma LLP. This posting does not constitute an endorsement by Taylor English of the author or of any related entity. 

There were a lot of lessons learned in 2020. Things like how important it is to have a stockpile of toilet paper; that you can get through the valley and reinvent yourself and your business; and of course, being grateful for the people we care about and the relationships we cherish.

There were also lessons learned about financial preparedness for the unforeseen or unexpected. Here are 4 financial metrics you need to evaluate in the new year when coordinating your capital and how it is being used. All of these apply both to your business and personal finances.

  1. An Emergency Fund is essential. This one is so simple, but it can be underappreciated and is often overlooked. However, if you needed cash in a time like 2020 and had the emergency fund, you likely rested a little easier. There was arguably no better reason to tap into that emergency fund than during the pandemic if you were struggling to keep your doors open and staff employed. Yes, the funding from PPP, EIDL, grants or other sources were a lifesaver, but don’t count on something like that always being available. You need to create that safety net for whatever may happen next time. Liquidity is access to cash or something that can be immediately converted to cash without significant loss of value. It’s imperative to understand what access to capital you currently have which could include checking/savings at a bank; a line of credit based on collateralized assets (on your house, investment account, etc.); or conservative investments like Treasury bills. There is no one-size-fits all approach to an emergency fund as the proper amount depends on a number of factors.
  2. You should have a Budget that you review on a consistent basis. Whether it’s sophisticated or simple, creating a budget is guaranteed to help you improve your financial situation. If you’re just getting started, the first step is to capture all of the information on your income and expenses and group it in a way that is easy to understand. There are plenty of resources ranging from apps like Mint to an Excel spreadsheet. Next, understand what is coming in and what is going out (and where to) for a period of time, like the last 3, 6 or 12 months. Step 3 is to evaluate what you could do to help you achieve your financial goals. Finally, track your progress over the next 1, 3, and 6 months to see how you’re doing. This truly takes an ongoing effort, but it doesn’t have to be complex. It just takes a commitment and monitoring. You know the target numbers for your school like staff expenses in the 45-50% range. Personally, try the simple 50/20/30 method where 50% of your after-tax income is for fixed expenses (mortgage, utilities), 20% is for improving your financial situation (savings, investing, paying off debt) and 30% on discretionary spending (dining out, shopping).
  3. Create a plan for how you will eliminate Debt. Sometimes debt is necessary, especially if it provides a long-term return. No one likes student loans, but they help provide an education which launches your career. A mortgage allows us to have a roof over our heads. An SBA loan allows you to expand your operations. Conversely, many people accumulate debt that provides no real value other than short-term satisfaction. Buying a new wardrobe on the American Express or taking out a personal loan to go on vacation are not great decisions. Regardless of what debt you have, you should have a strategy for how you will get rid of it. Start by writing down what you owe on all debts, notably the lending institution, current balance, interest rate, minimum monthly payment, and payoff date. Then determine the best strategy to pay it off. Maybe it’s the “snowball” method where you pay off the lowest balance first, regardless of interest rate, in order to create some momentum. Debt affects all of us psychologically and impacts our decision-making and our stress. It does not have to be that way!
  4. Invest in your future. Investment comes in many different forms (it’s January, so we all have a fitness goal for at least the next few weeks). Consider investing in two ways this year. First invest in your staff through enhanced benefits. A company retirement plan can be an attractive benefit and aid in staff retention, especially if you are helping them contribute. There are several different types of plans that could fit your needs. A 401(k) that is properly structured can be a big benefit for both the Owners as well as the Directors/Staff. There are many factors that can take your 401(k) from a bare-bones headache to a significant benefit, so work with the right advisors to help you in the decision making. Secondly, invest your savings to receive a return on your capital. Set a savings goal (see the part above about budgeting), and then establish a systematic way to have savings happen automatically via electronic transfer. Many investors fled to cash during the downturn in 2020 due to perceived safety but may have done more harm than good. You should have a healthy cash position as a safety net (see the part above about emergency funds); but your investments should have the long view in mind. Don’t worry about the noise of the day and what happens in the stock market over the short-term. Instead, maintaining a long-term perspective will allow you to experience the power of compounding returns.

Last year, we experienced how just one thing can dramatically impact all of us. That impact can have a domino effect personally, professionally and financially. You likely saw how your financial plan stood up against the unexpected.

Coordinating your capital: Consider a financial check-up and prioritize a stress-test of your plan to ensure there are no gaps that exist. Having the proper pieces in place financially to help you weather the next storm can be the difference between defeat and success.

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Mark Beal, CFP® is an advisor with Baer Wealth Management. Most of his work is with business owners – specifically owners of childcare centers –  who are unsure of how to maximize their personal wealth from the operations of their business. Mark helps clients make sound financial decisions, mitigate taxes, implement proper asset protection and asset transfer strategies, and magnify their gifts to others based on charitable intent. He is located in Atlanta, GA and serves clients nationwide. Visit to learn more and read a free white-paper on the top financial challenges for childcare owners.

The information in this post is for informational purposes only and does not constitute financial advice. You should consult with your advisor(s) before making any decisions.

The author is not an attorney and is not affiliated with Taylor English Duma LLP. This posting does not constitute an endorsement by Taylor English of the author or of any related entity.